Question

During 2019, Bold Fashion, Inc., recorded credit sales of $710,000. Based on prior experience, the company estimates a 2 percent bad debt rate on credit sales. Required: Prepare journal entries for each transaction: (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) a. On May 12, 2019, an account receivable of $2,600 from the prior period was determined to be uncollectible and was written off. b. Record the bad debt expense for 2019 using the Percentage of Credit Sales method.

Answer 1

a. On May 12, 2019, an account receivable of $2,600 from the prior period was determined to be uncollectible and was written off.

Debit Allowance for doubtful debt $2,600

Credit Accounts receivable $2,600

Being entries to write off accounts receivable previously provided for.

If the account had not been provided for before,

Debit Bad debt expense $2,600

Credit Accounts receivable $2,600

b. Bad debt expense for 2019 using the Percentage of Credit Sales method

Debit Bad debt expense $14,200

Credit Allowance for Doubtful Debts $14,200

Being entries to record debts that may be uncollectible

Step-by-step explanation:

When a company makes sales on account, debit accounts receivable and credit sales. Based on assessment, some or all of the receivables may be uncollectible.

To account for this, debit bad debit expense and credit allowance for doubtful debt. Should the debt become uncollectible (i.e go bad), debit allowance for doubtful debt and credit accounts receivable.

Bad debt at 2 % of credit sales

= 2% * $710,000

= 2/100 * $710,000

= $14,200